Market Liquidity around Quarterly Earnings Announcements


In Japan there has recently been a rapid increase in the number of firms disclosing quarterly earnings. I investigate the information asymmetry and market liquidity around the quarterly earnings announcements, by focusing on the bid-ask spreads and quoted depths. Prior theoretical research has indicated that information asymmetry is exacerbated and market liquidity is reduced just before and at the point of public information disclosure, and that information asymmetry is improved and market liquidity is enhanced by disclosing public information. Using the transaction data of 121 firms that have implemented quarterly earnings reporting during 2001, I find that there are significant decreases in daily bid-ask spreads and slight increases in daily depths during the period just after the release of the quarterly earnings, which are consistent with the prediction based on prior theoretical studies. However, I do not find strong evidence that the spreads are wider and the depths lower during the pre-announcement and announcement periods.

Key Words
Quarterly Earnings Announcements; Information Asymmetry; Market Liquidity; Bid-Ask Spread; Quoted Depth

Data Availability
The data used in this study are publicly available from the sources indicated in the text.



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